The yield, which rises when prices fall, first rose above 7% last week, marking the highest level since the euro was launched in 1999.

Spain cannot afford to borrow at 7% for long and analysts say the nation is effectively shut out of the market at these levels. In addition, the 7% level is psychologically important because investors see it as a potential trigger for a government bailout.

New Democracy, one of the political parties that signed off on Greece's bailout earlier this year, won the most votes in Sunday's election. But the outlook for Greece remains uncertain as politicians must now form a coalition government, something they failed to do last month.

The concern is that instability in Greece could further undermine confidence in the Spanish bond market.

"The solvency risk in Spain and its banking sector is likely to dominate markets as the smoke on the Greek elections clear," said fixed-income analysts at Nomura Securities in a note to clients.

The Spanish government has requested up to €100 billion from the European Union to recapitalize insolvent banks. But the rescue plan failed to ease concerns about the sustainability of Spain's public debt.

Moody's and Fitch both downgraded Spain's credit rating following the request for aid, which many analysts say simply transfers the banks' bad debt to the government.